Early Briefing: A Question of Liability

*When Blackstreet Capital Management affiliate SFCA in April purchased the assets of Simplicity for Children, a leading manufacturer of children's furniture, it structured the deal so it would not assume responsibility for products already on the market. Yet, last week, the issue of liability arose when the Consumer Product Safety Commission directed stores to pull Simplicity bassinets from their shelves after the deaths of two infants.

Blackstreet, a Bethesda private-equity fund, got involved with Simplicity when the Reading, Pa., company was in trouble. Last year, Simplicity had issued its fourth crib recall since 2005, pulling 1 million units -- the largest crib recall in U.S. history. In addition, a 4-month-old Missouri girl had died in one of its bassinets on Sept. 29, and the company was losing money. SFCA was aware of the recall when it bought Simplicity's assets.

When the CPSC issued the warning about Simplicity bassinets last week, the commission turned to retailers to yank bassinets off store shelves. SFCA had refused to issue a recall, saying it gained the right to sell products under the Simplicity brand but that it did not assume the liability of products already on the market, said Rick Locker, an attorney for SFCA.

Traditionally, only mergers result in one company taking on the liability of another, said Alan O. Sykes, a professor at Stanford Law School. A major benefit of buying assets is that no liabilities are incurred.

Adams National faces mounting losses on real estate loans and this summer disclosed that it had been classified as "troubled" by its regulator, the Office of the Comptroller of the Currency.

The company offered no explanation for Hubbard's departure, but Marshall Reynolds, the largest shareholder, said it was connected to the rising losses. Reynolds said the bank would now focus on correcting its problems, beginning with a board meeting today to discuss possible replacements for Hubbard.

*The latest contract awarded to build part of the intercounty connector will cost $100 million more than the highest price predicted for that seven-mile section, a sign critics say shows that the project is in danger of exceeding its budget. The middle segment of the six-lane toll highway between Georgia Avenue and Route 29 was predicted to cost $410 million to $460 million, according to documents on the project's Web site. The agreement, known as Contract B, was awarded July 22 at $559.7 million, 22 percent above the most recent estimates, Maryland highway officials said.

*JE Robert Cos. made three more hires from General Electric as former GE executive Michael Pralle expands the company's business in the Czech Republic and Eastern Europe. President Pralle, who ran GE's real estate business, is joined at the McLean real estate investment firm by Karim Habra, Christopher Zeuner and Petr Kosar, whose task will be to acquire properties in Central and Eastern Europe, JE Robert said. The three will be based in Prague.

Pralle said he intends to shift the mix of real estate investments to 60 percent foreign, 40 percent American over the next four years, from the current 60 percent U.S. concentration.

*GTSI, which provides computer services to government contractors, said Chief Financial Officer Joe Ragan is leaving the company to take the same post at drilling services firm Boart Longyear. GTSI named Peter Whitfield as interim head of finance. He has been vice president of financial planning, analysis and internal audit.